For buyers and sellers alike.
Title insurance insures property owners that they are acquiring marketable title. Unlike casualty insurance (which insures against future events), title insurance is designed to eliminate risk or loss caused by defects in title from past events. Title insurance provides coverage only for title problems.
A title insurance policy is a contract of indemnity which insures against loss if the title is not as reported; and if it is not and the owner is damaged, the title policy covers the insured for his/her loss up to the face amount of the policy.
Title Search. Issuing a title policy is an extensive and exacting process. Title companies work to eliminate risks by performing a painstaking search of records to determine the current recorded ownership, any record liens, encumbrances, or other matters of record which could affect the title to the property. Once a title search is complete, the title company issues a preliminary report detailing the current vesting, description, taxes, and exclusions from coverage.
Preliminary Report: What To Look For
- Verify the ownership vesting. Be certain the names on the report are the same as the names on the purchase contract.
- Verify the property address. The plat map and legal description should match the address.
- Carefully review the exceptions. Common exceptions include current taxes, bonds, deeds of trust, Mello-Roos assessment district items, CC&Rs and easements. Be sure the CC&Rs or existing easements do not interfere with the Buyer’s future plans.
- Always look for surprises. If you cannot locate an easement, if an unexpected deed of trust shows up, or if you see an item you were’t aware of before, immediately call the escrow officer or title company to discuss the matter. The responsibility for early detection and resolution of problems falls on the entire escrow team: Realtors, escrow and title companies, and the Buyers and Sellers as well.
Escrow is the depositing of funds and documents that establish the terms and conditions for the transfer of property ownership with an impartial third party for delivery upon completion of the terms of the escrow instruction.
When the parties deliver documents and money to the impartial escrow holder to be held for further delivery until certain conditions have been met, we say the documents are held “in escrow”. We may also say the parties have “opened an escrow”. Each of the principals of the escrow (Seller, Buyer, Lender) will give to the escrow holder written instructions setting out the conditions under which the further delivery is to be made.
Purpose. The common use of an escrow is to enable the parties in a real estate transaction to deal with each other with less risk.
A typical escrow transaction. An escrow begins with your Realtor ‘opening the order for title work’ and providing the Purchase Agreement and all executed documentation to escrow. Once received, the title company prepares a preliminary report. Upon receipt of the report, an analysis is made to determine the necessary action and documents required to complete the transaction. When all the title and financial requirements are met and instructions from all parties can be fully complied with, the escrow is said to be “in perfection” and can close.